SDDDC News

Breakthrough @ CRISIS for DAIRY

2020-3-11 11:12:34Comments:0Views:252
category：SDDDC News

“Misfortune and fortune cross their paths. Disasters and
opportunities come at the same time. When standing at the intersection, the grumblers
and escapists turn left in panic, while those who face the challenges turn
right in the course of solving problems. If disasters can’t be avoided, we have
to learn to live with them, and try to tear apart the misfortune, letting in
sunshine and hope that wither darkness and fear.”

Sino-Dutch Dairy Development Center (hereafter, SDDDC)
hosted a live stream on February 28th to discuss the dairy industry’s
opportunities facing the current crisis. James Su, the Secretary-General of
SDDDC and the host of the live stream, pointed out that milk, as a popular gift
for families and friends during the Spring Festival season, reached the lowest sales
of recent years after the outbreak of novel Coronavirus. Yet he quoted the words
above to encourage the dairy industry to face and embrace the multiple
challenges it brought, including inventory pressure, the dilemma of spray
drying, the heavy loss of dairy farming, and so forth.

In face of those challenges, how to build consensus and
contribute wisdom, in all links of the dairy industry chain, such as farming,
processing, and consumption, to deal with the uncertainties, has become a
shared concern of the whole industry. On the live stream, experts, scholars,
and enterprises executives from different branches of the dairy industry
explored the opportunities under the current crisis and shared their in-depth
understandings.

The highlight of this event is the discussion on current
situations and recommended solutions from perspectives of all links of the
whole dairy industry chain. The expert team invited to the event consists of Li
Shengli, Director of SDDDC and Chief Scientist of the National Dairy
Industry and Technology System; Grace Chen, CEO of Royal
FrieslandCampina China; Yang Yong, Vice President of Henan Hua Hua Niu
Dairy Group Co., Ltd.; Guan Ming, President and General Manager of
Beijing Eastern Bell Technology Group, senior engineer, think-tank member of
Beijing Municipal Science & Technology Commission; Jiang Linzheng,
Vice President of Nanjing Weigang Dairy Co., Ltd.; Long Jiang, President
of Yunnan Niuniu Animal Husbandry Co., Ltd., President of Yunnan Zhadian Dairy
Co., Ltd.; Sun Zhihai, General Manager of Yunnan Niuniu Animal Husbandry
Co., Ltd.; Feng Li’ke, CEO of Guangdong Yantang Dairy Co., Ltd.; and Dr.
Jiang Weiming, CEO of DSM China, Senior Global Executive Vice President of
DSM. James Su, the Secretary-General of SDDDC, hosted the event.

The epidemic has been under relatively good control in
China, but worldwide the situation is not as optimistic, with signs of turning
even worse. Due to the influence of the epidemic, the global stock markets have
witnessed constant drops recently. Uncertainties cloud the global economy, the
outlook being unclear. In China, the outbreak of coronavirus has the most
significant impact on the tertiary sector. The secondary industry sector
suffers more than the primary industry from the outbreak of the epidemic, as many
manufacturers have experienced lack of orders, shortage of labors, restriction
on operation hours, disruption of supplies, and tight cash flow. Therefore, we
should pay attention to the spread of the epidemic in Japan, South Korea,
Europe, North America and other countries and regions, and follow closely the
influence of the global economic situation on our domestic market. If the
international supply chain is cut off, China will undergo a shortage of supply.

The domestic animal farming industry also endured manifold
impacts of the epidemic on feeds production, raw-material supply, animal
raising, products processing, and consumption market. The existing order of the
industry has been disrupted as traffic and logistics have been blocked, prices
of production material have risen, stock has accumulated, and the consumption
has been sluggish. If we narrow down to the dairy sector, the main problems are
as follows: 1) the shortage of labor and the increase of labor costs.
Statistics show that about 60% to 70% of dairy businesses are in shortage of
labor, because farm workers have to be quarantined before they could return to
work, and technicians from dairy companies are not allowed to enter the dairy
farms to help with the operation. 2) The significant rise in price of feed by
5% - 10%. 3) The surplus of raw milk. In Hubei Province some of the surplus raw
milk has to been dumped because the logistics has been disrupted. In other
regions, most dairy companies have opted to spray drying of the raw milk. 4) The
purchase price of raw fresh milk has dropped in most provinces since January
2020. The reason behind it is mostly the decrease in sales and consumption. The
pressure from the downstream end of the industrial chain has been transferred
to the upstream end.

The central government is taking effective measures to
combat the epidemic and ensure the social and economic development over this
crisis. We are confident that the crisis is temporary and there are
opportunities coming with the challenges. With various favorable and supportive
policies being introduced, the economy will welcome an explosive growth in the
second and third quarters which will offset the losses in the first quarter.
The dairy industry should stay calm and work to restore the market by promoting
dairy knowledge and nurturing consumers’ habit of drinking milk. At the animal
farming end of the dairy industry, farms should take some scientific and
reasonable emergency measures to stabilize the milk production and reduce
losses in the short run. In the long term, it is essential to enhance the
competitiveness of China’s dairy industry by increasing the per-cow yield, raising
more dual-purpose cattle, combining dairy farming and crop farming, supporting
the farmers to participate in processing under the direction of the government,
and by taking other measures that will underpin a stable and fast growth.

Break through the current predicament and
look into the future

New ways, new ideas, new trends

Grace Chen, CEO of Royal FrieslandCampina
China

Continue with digital marketing, stay in
close communication with consumers, and suggest development of the cheese
industry

Royal FrieslandCampina N.V. is a cooperative, so no matter
how the market is, the company is obligated to purchase all the good-quality raw
fresh milk from its member farms. Cheese products have the feature of long
shelf life, and therefore, they can serve as a buffer against the market
stagnation for the dairy producers. The Netherlands’ experiences in cheese
production is worth reference, but if China is to promote cheese production,
the whole dairy industry chain has to work together. SDDDC, with a think tank
of the industry, may coordinate the development of cheese production.

After the outbreak of
coronavirus, FrieslandCampina responded to the situation quickly, doing its
best to turn the challenges into chances. FrieslandCampina has managed to
increase its sales even when the conventional distribution channels have been
severely interrupted. This success should be attributed to the company’s genes
of digital marketing, the commercial team’s quick adaptation of strategies to
the new situations, and the supply chain’s rapid responses.

The consumer education team adopted live streaming, short
videos, social marketing and other ways to promote the products. Since the
consumers became more aware of the importance of immunity after the outbreak of
the epidemic, the team highlighted the extensive amount of lactoferrin in our Friso
products. The company also increased its investment on the online promotion.

We stayed close with
our consumers and provided them with good services during the crisis. Over 3000
parenting consultants of our company delivered the products to the consumers by
various means regardless of the costs, especially in Hubei Province.

Shouldering the social responsibility is the base of a
brand. After the epidemic broke out, Royal FrieslandCampina N.V. has worked
closely with its business partners and the government to guarantee the supply
and delivery of its products. The value of a business should not only manifest
in its products, but also in its contribution to the society, and it is in
moments of crisis when a brand stands out with its value.

After the crisis, the consumption of dairy products is estimated
to increase. Nutrition is essential for immunity whose importance people have
generally come to be more aware of after the breakout of the coronavirus. In
2003, after the epidemic of SARS the consumption of yogurt increased by 40%,
and liquid milk by 20%, and that had been before China became the second
largest economy in the world. This time after the epidemic, the consumption of
dairy products will probably increase, and at the same time, the consumers’
demands may become more diverse.

The consumers’ desire
for healthy and balanced diet and lifestyle will become stronger, so will their
demand for dairy products’ diverse nutritional values. This may urge the dairy
producers to innovate and diversify their products to meet the consumers’
needs.

The consumption of dairy products is increasingly influenced by the
socialmedia, and the younger generation of
consumers tend to choose brands that convey values that fit their own.
Therefore, online marketing that allows the producers to send out messages to
their target groups, and to actively communicate with the consumers, is
becoming more and more important.

Online and offline marketing channels will merge with
acceleration; online platforms and o2o platforms need to be expanded; and
digital marketing is becoming progressively important.